The morning news. [volume] (Savannah, Ga.) 1887-1900, 1887-05-30
A BIG SUIT.
proceedings to be Brought Against
Gould and Sage.

proceedings to be Brought Against
Gould and Sage.
Il The New York Commercial advertiser
#sovs: A lawsuit involving several million
Nj dollars is about to be commenced against
N.Tav Gould and Russell Sage and the trustees
&of the consolidated mortgages on
&the Kansas Pacific railroad by
&toreign holders of bonds issued
2elcited during the recent examination into
I'm affairs of the Pacific railroads by the
United States Pacific Railway Commission
(which have long been suspected by inter-
Se,ted parties, but which they were unable to
#prove. Now the very matters they were III
Xfhe dark about are made clear to them, and
&the suit, 50 long held in allegiance, will be
#the result.
Through the examination before the COM
Emission Several gentlemen were in constant
attendance, apparently as casual spectators,
IA mt it seems they had an object in view be-
W sides mere curiosity Among these specta-
Htors was William H. Delaney, the attorney
8for the Frankfort and Amsterdam holders
IN the Kansas Pacific bonds The amount
bnvolves about 100000.
n The circumstance on which the foreign
|Abondholders will base their action is as fol-
lows: Prior to 1879 the Kansas Pacific road,
besides its stock and debt, was loaded down
with great variety of bonds like the land
erant bonds, first mortgage bonds, income
bonds. and others, drawing different rates
IN interest and covering different sections
III the road. These clashing interests were
20 diverse and complicated that they
They threatened disaster to the different
creditors.
al In order to simplify matters consoli-
IMlated mortgage was agreed upon with Jay
#Gould and Russell Sage as trustees, which
fwould wipe out all the other classes of secu-
&rities and place all creditors on an equal
Footing At the time this consolidated mort
Agage was made the Kansas Pacific road
owned sc. 900 shares of stock of the Denver
#Pacific railroad, worth at par 800 per
&share but at this time of no great market
8yalue These shares were included in
1.-The list of properties covered by
Lille great blanket mortgage and We're part
4of the assets that gave the mortgage a
4value Early in 1879 the plan to consoli-
date the Kansas Pacific and Union Pacific
breads was about to be carried into effect.
|Gould, Sage and Sidney Dillon were direct
ors in both roads at the time and CONVEX
SAINT with all the facts and circumstances re-
hating to the consolidation mortgage and the
proposed consolidation of the two roads
II One day, about Jan. /, 1875, as the story
{runs, these three gentlemen were in the
office of the Kansas Pacific railroad, at No.
3 Is Broadway. Mr.. Dillon wrote letter to
lNessrs Gould and Sage, as trustees of con-
soidated mortgages, asking them to
5reease from lien of mortgage the
900 shares of Denver Pacific stock,
and handed the modest request
Gould and Sage then sat down
at the same desk that Dillon had occupied,
and CD letter paper bearing the same head
ing as Mr.. Dillon, indicted reply declining
to release the stock, as requested, on their
own responsibility, and suggesting that an
action should be brought against them ask
ling for the release of the stock as desired, to
which they would make no serious defense
An attorney was consulted the same day
and he promptly drew up and served COM
plant on the defendants, Gould and Sage
Ordinarily at least twenty days would have
elapsed before an answer would be served
but in this unique case an answer was served
on the following day and all application
made to Judge Donohue for the appointment
of H. II. Ruggles as referee, and within the
next two or three days called trial was had
before the referee, during which Sidney
Dillon testified that the 80, 600 shares of Den
yer Pacific stock was worth but S200, 900 or
100000; its face value was s., 200, 900. A re-
port made in accordance with the testi-
mony was confirmed and Judgment entered
and the stock was released from lien of the
mortgage and transferred to Gould, Sage
and Dillon as individuals. The whole law
suit involving so large sum of money was
conceived, commended and ended inside of
one week.
On the same day or the day after the suit
was ended and the stock transferred, the
consolidation of the Kansas and Pacific rail
roads was consummated, and shortly after
such consolidation the Denver Pacific stock
became worth its face value. Had that stock
remained under the lien of the consolidated
mortgage, each bond issued under that mort
gage would have been worth its pro rata
share of 100000 more than it is worth
to-day. This sum, together with the &C
" crued interest, would be about S5,000,000
1t is to secure proportionate share of the
$1,000, 900 that the foreign bondholders pro-
pose to bring their suit against Gould and
Sage, claiming that they have been wrong
fully deprived of that amount, and that a
court Of justice was improperly used to
give color of legality to the robbery. Just
what number Of bondholders or what
amount viii join in the present proposed
action is not determined, but enough have
Sgnifed their intention to become parties
plaintiff to make it one of the great lawsuits
Of the day.
The total amount of bonds issued under
the consolidation mortgage was about $15,-
OO0,0OO, great many Of which were fioated
IN Frankfort and Amsterdam and some in
London.